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Facts
The assessee filed an appeal challenging an order passed under Section 250 of the Income Tax Act. The appeal primarily concerned the validity of a notice issued under Section 148 for AY 2016-17, which the assessee contended was issued without proper sanction as required by Section 151 of the Act.
Held
The Tribunal held that the notice issued under Section 148 was invalid because it was issued beyond three years from the end of the assessment year without obtaining prior approval from the appropriate authority as stipulated in Section 151 of the Act. Consequently, the reassessment proceedings initiated based on this invalid notice were quashed.
Key Issues
Whether the notice issued under Section 148 for AY 2016-17 is invalid due to non-compliance with the sanctioning procedure under Section 151 of the Income Tax Act.
Sections Cited
147, 148, 151, 250, 148A
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Income Tax Appellate Tribunal, “C” BENCH MUMBAI
Before: HON’BLE SHRI SANDEEP GOSAIN & SHRI PRABHASH SHANKAR
Date of Hearing 08.07.2025 Date of Pronouncement 24.07.2025 आदेश / ORDER
PER SANDEEP GOSAIN, JM:
1. The present appeal has been filed by the assessee challenging the impugned order 22.11.2024 passed u/s 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre, Delhi (NFAC) for the assessment year 2016-17.
Ld.AR had moved an application for seeking admission for additional grounds. In this regard we have heard the counsel of both the parties on this application filed by the assessee/appellant for seeking admission of additional ground of appeal and by going through the same we noticed that the additional ground is purely legal in nature and no separate documents or verification is required at this stage to adjudicate the said ground. Therefore, while replying upon the decision of the Hon’ble Supreme Court in the case of NTPC V/s. CIT(1998) 229 ITR 383 (SC) . We allowed the application for raising additional ground and consequently the said ground is admitted to be heard on merits.
“1. The Learned Commissioner of Income Tax-54, Mumbai erred in confirming the actions of the Learned Assessing Officer of reopening the assessment u/s 147 of the Income-tax Act, 1961 based on invalid sanction u/s 151 of the Income-tax Act, 1961. That the entire reassessment proceedings is void-ab-initio. The Appellant is challenging the validity of the notice issued u/s 148 of the Act dated 29/07/2022 especially since the sanction obtained by the Learned Assessing Officer u/s 151 of the Act is illegal and bad in law. The detailed facts including timeline of events for issuing notices along with permission obtained is as follows: - Particulars A.Y. 2016-17 Date of Notice u/s 148 of 21/05/2021 the Act as per old regime (deemed to be show cause notice u/s 148A(b) of the Act)
Sanctioning authority u/s Range 5(1), Mumbai 151 for the above- mentioned notice u/s 148 (old regime)
Date of Issue 28/05/2022 Letter/deemed notice u/s 148A(b) providing relevant material and information to the Appellant Date of Response filed by 11/06/2022 the Appellant to the above issue letter.
Date of Order u/s 148A(d) 28/07/2022 of the Act Sanctioning Authority of Pr. CIT Central -3, Mumbai order issued u/s 148A(d) (Under new regime)
Date of Notice u/s 148 of 29/07/2022 the Act as per New Law Sanctioning Authority of Pr. CIT Central -3, Mumbai notice issued u/s 148 (Under new regime)
Pursuant to the directions of the Hon'ble Supreme Court in the case of Ashish Agrawal, the Learned Assessing Officer passed order u/s 148A(d) of the Act and issued notice u/s 148 of the Act for A.Y 2016-17. From the observations of the Hon'ble Supreme Court, it is clear that though prior approval u/s 148A(b) and 148A(d) was waived, for issue of notice u/s 148A(a) of the Act and notice u/s 148 of the Act on or after 01/04/2021, the prior approval should be obtained from the appropriate authorities specified u/s 151 of the Act (as per new law).
Provisions of section 151 of the Act under the new law read as under: - [Sanction for issue of notice.
151. Specified authority for the purposes of section 148 and section 148A shall be, - (i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year, (ii) Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year.] In the Appellant's case from perusal of the above timeline of events, it is amply clear that the notice u/s 148 of the Act for A.Y 2016-17 is issued with prior approval of Learned Pr. CIT-3, Mumbai which is undisputed. For A.Y 2016-17, the period of three years has elapsed as of 31/03/2020 and notice is issued beyond three years on 29/07/2022. Therefore, as per the decision of the Hon'ble Supreme Court, the approval should have been obtained under 0the amended provisions of section 151(ii) of the Act, i.e the approval should have been obtained from the Learned Pr. Chief Commissioner whereas the approval has been obtained from Learned Pr. CIT Central -3, Mumbai as stated in the notice u/s 148 of the Act for A.Υ. 2016-17. Your honour may please note that the above case is already covered in the decision of the Hon'ble ITAT "C" Bench, Mumbai in one the group companies of the Appellant, M/s Precel Solutions Private Limited in & 210/MUM/2025 wherein identical facts are involved. Copy of the tribunal order in the case of M/s Precel Solutions Private Limited in ITA is enclosed as Exhibit F. Further, similar decisions have been given by the Hon'ble ITAT "D" Bench, Mumbai in the case of ACIT- 19(1) v. Manish Financials, & 5055/Mum/2024 decided on 02/12/2024 and the Hon'ble ITAT "A" Bench, Mumbai in the case of Ashok Amratlal Shah vs ITO Ward 42(1)(1), Mumbai, decided on 31/12/2024. In view of the above, the notice issued u/s 148 of the Act on 29/07/2022 for A.Y 2016-17 is issued without obtaining prior approval from the specified authority as per section 151 of the Act. Accordingly, the notice issued u/s 148 of the Act for A.Y 2016-17 is invalid and the consequent assessment u/s 147 of the Act is liable to be quashed.”
Since, the additional ground raised by the assessee goes to the roots of the case and is legal in question. Therefore we have decided to adjudicate the said ground firstly.
We have heard the counsel for both the parties, perused the documents placed on record and the judgment cited before us and also the orders passed by the revenue authorities.
From the records we notice that admittedly the year under consideration before us is Assessment Year 2016-17 and the notice u/s 148 for the Act has been issued in the present case with the prior approval of the Ld. PCIT. In this case the period of 3 years from the end of the assessment year had elapsed on 31.03.2020 and notice u/s 148 of the Act was issued on 29.07.2022 i.e. beyond 3 years.
As per the decision of Hon’ble Supreme Court in the case of UOI Vs. Ashish Agrawal (2022 SCC Online SC 543), the approval should have been obtained from Ld. PCCIT u/s 151(ii) whereas in this case the approval has been obtained from Ld. PCIT, which in our view is in clear violation of law and thus bad in law.
The coordinate bench of ITAT in the case of M/s Precel Solutions Private Limited in has dealt with the similar facts and legal preposition and the operative portion of the said decision is reproduced here in below:
8, We have heard both the parties and perused the materials available on record. We have also deliberated upon the decisions relied upon by both parties. There is no dispute regarding the various dates on which the notices were issued by the AO. The same has already been narrated above. To recapitulate, it may be stated that original notice u/s 148 of the Act was issued on 21.06.2021, which was sanctioned by Addl. CIT - 8(2), Mumbai. However, the subsequent order u/s 148A(d) and notice u/s 148 of the Act were passed and issued on 28.07.2022 and 29.07.2022 respectively. There is no dispute that the notices u/s 148 of the Act for AY.2016- 17 and 2017-18 were sanctioned by Pr.CIT (Central)-3, Mumbai on 28.07.2022 and 29.07.2022 respectively vide reference No. PCIT(C)-3/Order u/s 148A(d)/2022- 23). This is evident from page 46 of the paper book filed by the assessee for AY.2016-17 and page 22 of the paper book for AY.2017-18. It is clear that the period of three years from the end of the assessment year 2016- 17 expired on 31.03.2020 and the same for AY 2017-18 expired on 31.03.2021. However, the notices were issued on 29.07.2022 and 30.07.2022 for AY.2016-17 and 2017-18 respectively. As per the clear and unambiguous provisions of section 151 of the Act, Pr. CCIT/Pr. DGIT or CCIT/DGIT should have sanctioned the issue of notice in these cases and not the Pr. CIT (Central)-3, Mumbai. Therefore, we find that the notices have been issued without obtaining prior approval from the appropriate sanctioning authority. Hence, they are not valid in the eyes of law. The decision of Manish Financial (supra) is directly on the issue. Under similar facts, the ITAT held that the assessment is liable to be quashed after discussing in detail the decisions of the Hon'ble Supreme Court in cases of UOI vs. Rajeev Bansal, Civil Appeal No.8629 of 2024 and Ashish Agarwal (supra) and the relevant provisions of the Act. The relevant part of the decision is reproduced below for ready reference and clarity:
14. We heard the parties and perused the material on record. In assessee's case for AY 2016-17 pursuant to the directions of the Hon'ble Supreme Court in the case of Ashish Agrawal, the AO passed an order under section 148(d) of the Act and issued a notice under section 148 on 30.07.2022. From the above observations of the Hon'ble Supreme Court it is clear that the though the prior approval under section 148A(b) and 148(d) were waived in terms of the decision of Ashish Agarwal (supra), for issue of notice under section 148A(a) and under section 148 on or after 1 April 2021, the prior approval should be obtained from the appropriate authorities specified under Section 151 of the new regime. The provisions of section 151 of the Act under the new regime read as under: Sanction for issue of notice.
Specified authority for the purposes of section 148 and section 148A shall be,- (i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year; (ii) Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year.
In assessee's case from the perusal of para 3 of the notice issued under section 148 for AY 2016-17 we notice that the same is issued with the prior approval of Pr.CIT-19 Mumbai accorded on 29.07.2022 vide reference No.Pr.Cit-19/148/2022- 23 and this fact is not contravened by the Id DR. For AY 2016-17, the period of three years have elapsed as of 31.03.2020 and the notice is issued beyond three years on 30.07.2022. Therefore as per the decision of the Hon'ble Supreme Court, the approval should have been obtained under the amended provisions of section 151(ii) of the Act i.e. the approval should have been obtained from the Principal Chief Commissioner whereas the approval has been obtained from Pr.CIT as stated in the notice under section 148 itself. Therefore we see merit in the contention of the assessee that the notice under section 148 for AY 2016-17 is issued without obtaining the prior approval from the appropriate authority. Accordingly we hold that the notice under section 148 is invalid and the consequent assessment under section 147 is liable to be quashed."
9. Since, the facts of the case are similar and also pertain to the same assessment year, following the decision in above case cited supra, the ground of the assessee is allowed and order of CIT(A) is set aside. It may be stated that ITAT, Mumbai has followed the above decision in Ashok Amratlal Shah (supra) and allowed the appeal of the assessee.”
Therefore, considering the totality of the facts and circumstances of the present case and also keeping in view the decision of the coordinate bench of ITAT, we allow the additional ground of appeal raised by the assessee and quashed the notice issued u/s 148 of the Act being bad in law and thus consequential proceedings initiated on the basis of said notice also stands quashed.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 24.07.2025 Sd/- Sd/- (PRABHASH SHANKAR) (SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 24/07/2025 Disha Raut, Stenographer आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��थ� / The Respondent. 2. संबंिधत आयकर आयु� / The CIT(A) 3. आयकर आयु�(अपील) / Concerned CIT 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण,मु�बई/ DR, ITAT, Mumbai 5. गाड� फाईल / Guard file. 6. आदेशानुसार/BY ORDER, स�ािपत �ित //True Copy//
उप/सहायक पंजीकार ( Asst. Registrar) आयकर अपीलीय अिधकरण, मु�बई मु�बई / ITAT, Mumbai मु�बई मु�बई